BHP Billiton
this week signed an agreement with the world’s largest steel maker, ArcelorMittal, to look at a joint venture to develop iron ore assets in Liberia and Guinea.

While a deal would make sense in terms of synergies (and BHP is big on iron ore synergies – just look at its $100 billion proposed joint venture with Rio Tinto) and building infrastructure in tough regions, it could also be seen as BHP cosying up to a massive power in the European steel lobby.

The main game for BHP is the Rio joint venture in the Pilbara and the main hurdle to that deal is the European Commission. European Union Competition Commissioner Neelie Kroes is being lobbied hard by Europe’s steel body, Eurofer, to reject the joint venture on the grounds of reduced competition and the risk the joint venture could control volumes by restraining growth.

ArcelorMittal is not only the world’s biggest steel maker, it is also the biggest in Europe with huge political power and connections.

The next best thing to becoming best pals with Kroes has to be a closer relationship with enigmatic ArcelorMittal boss Lakshmi MIttal.